The Bank of eEngland is coming under pressure amid claims of collusion in Libor manipulation during the financial crisis.
Photograph: Anthony Devlin/PA

John McDonnell, the shadow chancellor, is calling on Philip Hammond to hold an urgent public inquiry into whether Bank of England officials colluded in the rigging of the Libor rate.

The senior Labour politician said Hammond’s silence on the issue was unacceptable after a BBC Panorama programme said it had evidence of pressure exerted by Threadneedle Street on the setting of Libor – the London interbank offered rate, which is the interest rate banks charge each other for short-term loans.

Libor is used as a reference point around the world for loans and mortgages and is set each day by a panel of leading banks, with each one submitting the rates at which it is willing to borrow.

In a letter to Hammond released over the weekend, McDonnell said new allegations potentially implicating the Bank of England “demand an immediate response from this government”.

“Continuing official silence from the chancellor is not acceptable when confronted with this scale of rigging,” he said. “It is essential that we clarify who took the decisions to rig the Libor index, and when, so that the schools, NHS hospitals and local councils that lost out can be paid the compensation that is rightfully due and public confidence in our banking system and official institutions can be restored.”

More recently, the Bank of England has found itself under the spotlight after new details emerged of bankers discussing Threadneedle Street’s alleged involvement in the setting of Libor.

The BBC said its investigations added to evidence that the Bank of England had put pressure on commercial banks to push their Libor rates down and that the transcript of the phone conversation at Barclays called into question evidence to the Treasury select committee given in 2012 by the former Barclays boss Bob Diamond and Paul Tucker, former deputy governor of the Bank of England.

Del Missier told MPs on the Treasury select committee that he had issued the instruction after a conversation with his then boss, Diamond, in October 2008, when the financial system was on the brink. Diamond was then running Barclays Capital, the investment banking arm, before being promoted to chief executive.

Diamond resigned as chief executive of Barclays in the wake of the £290m fine received by the bank for attempting to manipulate Libor.

Tucker was also called before the committee to explain his dealings with Diamond. The MPs largely exonerated Tucker, but the release of a series of emails, including one in which he referred to Diamond as “an absolute brick”, raised questions about his cosy relationship with the City.

Responding to last week’s Panorama report, the Bank of England said: “Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question.”